BASIC CONCEPTS DR.N.K.GUPTA

Income – tax Act of 1961: On the basis of the recommendations made by the various committees, a new Act of Income-tax had been passed during the year 1961 termed as the “Income - Tax Act, 1961”..

 This Act came into force from 1 st April, This Act contains more than 400 sections and a number of sub-sections and 10 schedules. The Income – Tax department framed 121 rules for the effective application of this Act. These rules are termed as “Income - Tax Rules of 1962”. It also includes a number of sub - rules

 INCOME SECTION 2(24 ) ANY AMOUNT RECEIVED OR DEEMED TO BE RECEIVED OR EARNED OR DEEMED TO BE EARNED DURING THE PREVIOUS YEAR.

 SALARY  RENT  BUSINESS PROFITS  CAPITAL PROFITS  INTEREST  ANY OTHER SOURCE

IN GENERAL INCOME SHOULD BE OF REVENUE NATURE HOWEVER CAPITAL GAINS ARE ALSO TREATED AS INCOME

 DEFINITE SOURCE  LEGAL /ILLEGAL BOTH  RECEIPT OR ACCRUE WHICH EVER IS EARLIER  MEASURABLE IN TERMS OF MONEY  FROM OUTSIDE  INCLUDES GIFTS

 GIFTS BEYOND RS. 50,000 IN ALL IN A YEAR EXEMPT BEYOND WHICH IT IS TREATED AS INCOME

FROM A RELATIVE SP0USE OF INDIVIDUAL BROTHER OR SISTER OF THE INDIVIDUAL BROTHER OR SISTER OF THE SPOUSE OF THE INDIVIDUAL BROTHER OR SISTER OF EITHER OF THE PARENTS OF THE INDIVIDUAL ANY LINEAL ASCENDANT OR DESCENDANT OF THE INDIVIDUAL OR SPOUSE OF THEINDIVIDUAL SPOUSE OR THE PERSONS REFERRED ABOVE

 UNDER A WILL OR BY WAY OF INHERETANCE  ON THE OCCASIONOF THE MARRIAGE OF THE INDIVIDUAL  IN CONTEMPLATIONOF DEATH OF THE PAYER  LOCAL AUTHORITY  ANY OTHE FUND, TRUST OR INSTITUTION MENTIONED IN SEC.10(23C) OR 12 AA

 REGULAR INCOME  CASUAL INCOME  CAPITAL GAINS  ILLEGAL INCOME

Assessment The Act provides a mechanism for computing the tax relating to the income of an assessee pertaining to an assessment year. Such computation is made after allowing various deductions, exemptions, and rebates to the assessee, and is called assessment.

Assessment year Assessment year is the year in which the income of the previous year is to be assessed to tax. Got more confused? An illustration will clarify the matter. Income of the Financial Year will be assessed to tax in the assessment year , that is to say, the rates of Assessment year , will be applied to income of the Financial year Incidentally, Financial Year is referred to as the Previous Year in the Act.

Previous year defined. For the purposes of this Act, previous year means the financial year immediately preceding the assessment year : Provided that, in the case of a business or profession newly set up, or a source of income newly coming into existence, in the said financial year, the previous year shall be the period beginning with the date of setting up of the business or profession or, as the case may be, the date on which the source of income newly comes into existence and ending with the said financial year.

 N.R.SHIPPING COMPANIES (172)  PERSON LEAVING INDIA ( 174)  BODY FORMED FOR SPECIFIC EVENT (174A)  PERSON TRANSFERING THE ASSETS TO SAVE TAX (175)  DISCONTINUED BUSINESS (176)

Assessee Assessee is a person by whom any tax or any other sum of money is payable under the Act.

 AN ASSESSEE IS A PERSON WHO IS LIABLE TO PAY TAX  LIABLE TO FILE RETURN OF INCOME OR LOSS  LIABLE TO APPEAR BEFORE THE TAX AUTHORITIES EWITHER ON HIS OWN BEHALF OR ON BEHALF OT OTHERS  ASSESSEE IN DEFAULT

Person Its include  An individual  A Hindu undivided family  A company  A firm  An association of persons or a body of individuals whether incorporated or not  A local authority, and  Every artificial juridical person, not falling within any of the preceding sub-clauses

 INCOME FROM SALARIES+  INCOME FROM HOUSE PROPERTIES+  PROFITS FROM BUSINESS AND PROFESSION+  CAPITAL GAINS+  INCOME FROM OTHER SOURCES

 GROSS TOTAL INCOME LESS: DEDUCTION FROM SECTION 80 C TO 80 U

 ANY RENT OR REVENUE DERIVED FROM AGRICULTURAL LAND USED FOR  AGRICULTURAL PURPOSE  AGRICULTURAL PROCESS AND  SALE OF AGRICULTURAL PRODUCT ON WHICH ABOVE PROCESS IS DONE

 INCOME FROM HOUSE PROPERTY WHICH IS SITUATED ON THE AGRICULTURAL LAND OR IN THE IMMEDIATE VICINITY OF AGRICULTURAL LAND AND USED FOR  STORE HOUSE OR  OUT HOUSE

 SUGAR FACTORY TOTAL INCOME LESS MARKET PRICE OF SUGAR CANE  TEA ESTATES 60 % AGRICULTURAL INCOME  LATEX 65% AGRICULTURAL INCOME

 COFEE  IF COFEE IS GROWN,CURED AND SOLD THEN 75% AGRICULTURAL  IF COFEE GROWN, CURED, ROASTED,GROUNDED AND SOLD THEN 60% IS AGRICULTURAL

 STEP 1- ADD AGRICULTURAL INCOME AND NON AGRICULTURAL INCOME THEN CALCULATE TAX  STEP 2- ADD AGRICULTURAL INCOME AND TAX FREE INCOME THEN CALCULATE TAX  STEP 3- TAX= STEP1-STEP 2

Total Income of an assessee is calculated as under: Income of the assessee is computed under the following heads: Income from Salaries Income from House Property Profits or gains of Business or Profession Capital gains Income from other sources